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Trade mark owners take note – registration is no defence for misleading conduct

The varied and strong protections given to registered trade marks under the Trade Marks Act 1995 (Cth) can often cause trade mark owners to overlook the operation of the consumer protection provisions of the Australian Consumer Law (ACL) relating to misleading and deceptive conduct.

The decision of the Federal Court earlier this year in CI JI Family Pty Limited v National Australian Nappies (NAN) Pty Limited [2014] FCA 79 (the Nappyland decision) has provided a reminder to trade mark owners not to forget that the registration of a trade mark does not necessarily operate as a trump card in actions for misleading and deceptive conduct under the ACL or as a defence to the tort of passing off.

What happened in the ‘Nappyland’ proceedings?

In 1997, Mr Ngo and Powerware Consultants Pty Ltd (owned by Mr Ho and his wife) entered into a partnership trading under the business name “Nappyland.” This partnership sold commercial quantities of nappies and other products to child care centres.

The partnership dissolved several years later and Mr Ho, through a new entity National Australian Nappies (NAN) Pty Ltd, continued to carry on business nationally, including in New South Wales, using the “Nappy Land” business name.

After the dissolution of the partnership, Mr Ngo through his entity CI JI Family Pty Ltd (CI JI) also continued to carry on business in New South Wales only, using the business name “Nappyland” and the following logo:

Both entities were in the business of selling commercial quantities of nappies and other baby related products.

Interestingly in this case, no argument of trade mark infringement was raised by either party.

From mid 2013, NAN occupied part of a warehouse in Smithfield, New South Wales and commenced actively marketing their products in New South Wales. This marketing included perusing the Yellow Pages and internet directories for advertisement profiles of potential customers and forwarding price list brochures to those parties.

Whatever NAN’s activities in NSW before, from 2013 onwards CI JI alleged that NAN’s marketing activities in NSW were causing confusion among its customers. Evidence was presented showing that a number of CI JI‘s customers had received price lists of products being supplied by NAN.

Registered Trade Mark Rejected as a Defence to Misleading and Deceptive Conduct

In its defence to CI JI’s action for misleading and deceptive conduct and passing off, NAN argued that it was entitled to trade in NSW by virtue of its registered trade mark.

This argument was unequivocally rejected by Justice Flick.

The Court stated that “the registration of a trade mark…confers no licence upon the registered owner of that trade mark to use that mark in a manner which is misleading or deceptive, or in a manner which passes off the goods of the registered owner as the goods of another.”

Despite the vague evidence submitted by CI JI, the Court expressed little hesitation in concluding that the similarity of “Nappyland” and “Nappy Land” in written and spoken forms were such that NAN’s use of “Nappy Land” was likely to, and in fact had, mislead consumers. Injunctive relieve was granted to CI JI, with NAN restrained from using the words “Nappy Land” in promoting any business in NSW for the sale of nappies, including by restricting access to its website to consumers in NSW.

Reaching the conclusion that misleading and deceptive conduct was established, Flick J did not decide the question of passing off, however he did indicate that if this had been necessary it would have been made out.

Taking Care in Conducting Business

While trade mark and consumer protection laws have some degree of overlap, the Nappyland decision has highlighted the need for registered trade mark owners to be mindful of the separate nature of these laws.

The mere fact of trade mark registration is not a ‘silver bullet’ which will defend a business from claims against its conduct in a particular jurisdiction.

Indeed there is nothing at all in the Trade Marks Act 1995 (Cth) which suggests that the Act operates to constrict or confine the operation of the Australian Consumer Law.

Compare jurisdictions: Litigation: Enforcement of Foreign Judgments

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